This months newsletter from Colin Smith of "PhotoshopCafe.com create, don't steal" gives some nice descriptions of the main font families.
Serif: A serif is the little tick on the ends of the characters on fonts such as Times Roman. These serifs are added to fonts to assist in reading. The serifs help the letters flow together and thus will make a page of paragraph text appear smooth and easy to read as the serif sweeps the eye from one character to the next.
Sans Serif: Sans is Latin for "without" as such a sans-serif font is one without a serif. Common fonts are helvetica, arial and futura. These tend to look very modern and clean. Sans-serif fonts give themselves to clean typography and are especially suited to small print such as business cards, forms and navigation on webpages.
Script: Should never be set all caps and make paragraphs of text difficult to read. However script fonts are very elegant and are the staple for wedding invitations and certificates.
Decorative: This family covers everything from the wild fonts that look like jungle creatures through to art-deco fonts such as Anna. These should be used sparingly and only when the font will reinforce the message. A piece can look wonderful with these wild font, but beware! Overuse can cause your work to look like it fell from the tacky tree and almost stuck to every branch.
Typography is something that can make or break your work. It is well worth investing a little time on this art.
Colin Smith has done some amazing work with Photoshop. One being this award winning illustration of his Guitar. Created entirely in Photoshop. No scans, photos, 3rd Party plugins, 3d programs were used.